What is the American Legion doing about Congress’ failure to pass a budget – the “Shutdown” and the threat to VA and disability checks?

Answer:

Let’s first identify what the existing problems are:

Failure of the Congress and the President to agree on a budget for the United States for fiscal year 2014 (October 2013-September 2014).

Failure of the Congress and the President to agree to pass a continuing resolution (CR) which, by default, would simply carbon copy the FY 2013 budget onto the FY 2014 budget year.

Failure of the Congress and the President to agree on either raising the debt ceiling, or employing a combination of reduced federal spending and increasing federal revenue (mostly accomplished through tax receipts) to ensure the national debt does not exceed the current congressionally set debt ceiling.

Before I get started – DISCLAIMER – I’m not a budget guy. If I happen to miss a nuance or misspeak, please don’t come gunning for me. So I am trying to give you the pedestrian basics as I understand them, and as they relate to The American Legion’s legislative agenda.

These three issues are separate, but all connected to the same problem. Every year, the House of Representatives, the congressional body responsible for raising revenue according to Article 1, Section 7 of our Constitution, offers a bill that details a proposed budget. Every year, the Senate does the same thing, and every year, according to the Budget and Accounting Act of 1921, the President must present his budget request to congress by the first Monday in February.

Ultimately, the House and Senate are supposed to appoint a conference committee, take all three budget requests, and come up with a national budget by April 15th, the same day your taxes are due.

The last time Congress passed an actual budget was 1997. In 2009 an omnibus spending bill was passed, which is kind of like a budget, but it’s not. One difference is that a budget (as the name implies) requires a balancing of the books, where as a spending bill simply authorized expenditures. As you can imagine, the budget is huge and funds the entire federal government, and is broken down into accounts, or appropriations bills. They are:

Agriculture
Commerce, Justice, and Science
Defense
Energy and Water
Financial Services
Homeland Security
Interior and Environment
Labor, Health and Human Services, and Education
Legislative
Military and Veterans
State and Foreign Operations
Transportation and Housing and Urban Development

That’s why the “budget” bills are thousands of pages long, and also why strange things end up getting funded that make us scratch our heads and ask, “Really?”, because they get buried in the budget.

The way the budget is supposed to work is that the committees responsible for the federal agency that needs money to operate submits proposals to the budget committee requesting funding for the federal operations under them. As an example, the House and Senate Committees on Veteran Affairs, and the House and Senate Committees on Armed Services will both provide input to the budget committees to fund item number 10, Military and Veterans.

Once the budget committee receives all of these recommendations, they then sit down and come up with an overall budget. The Chairman of the House Budget Committee right now is Chairman Ryan. This is why you will commonly hear the House version of the budget referred to as the “Ryan Budget”.

Ideally, the House and Senate then conference and come up with a unified budget that they then submit to the President, just like any other bill, and the President either signs it into law, or vetoes it and sends it back to congress.

When this process fails, we end up with no budget for the upcoming year, in this case FY 2014. When no budget agreement can be reached, congress can pass a CR (like I explained above). CRs can either represent the entire federal budget, or they can be passed by individual spending authorities, which can drill down into the federal budget all the way down to line items if they want.

If Congress fails to pass a CR, then spending authority for any account not already budgeted for ceases. That doesn’t necessarily mean that they do not have money to stay open, it means that they lack the federal authority to be funded in the first place, therefore, a federal activity that is unfunded cannot legally exist.

As you can imagine, there are hundreds of laws and scenarios that surround the federal budget, and one of those laws involves something called “Advanced Appropriations”. Advanced Appropriations means that the funding (or appropriations for that activity) are appropriated two years in advance, so essentially they are not included in the standard appropriations process with the rest of the accounts. There are a couple of federal accounts that are included in Advanced Appropriations, and most of the Department of Veterans Affairs (VA) money is included in advanced appropriations.

Also not included in budget process appropriation is mandatory spending. Things like Social Security and Veterans Disability payments are not included in the appropriations process because they are mandatory, as opposed to discretionary. As an example, Congress can decide to defund a program like highway repair or building VA hospitals, but they can’t defund Social Security or Veterans Disability, because those are already granted by law.

So, this brings us to the debt ceiling and how veterans’ disability checks might be affected.

Some argue that Congress’ need to annually raise the debt ceiling is an ineffective tool for controlling spending and, in 1979 (I’m skipping ahead in history regarding debt-ceiling legislation), Congress passed a parliamentary rule that simply assumed that every time the national budget was passed, that the debt ceiling was automatically increased to account for the budgetary needs of the nation.

That rule, also known as the Gephardt Rule, was repealed by Congress in 1995. Does 1995 ring any bells? Well, 1995, and ‘96 were the last two times the government was shut down due to Congress’ inability to pass a budget, or CR.

Now we have the added burden of Congress’ need to increase the debt ceiling, which, if it does not get increased, will result on the United States not having the authority to pay both the principal and interest payments on its outstanding debt, and will legally limit the nation’s ability to borrow, if needed. This is why, in 2011, Moody downgraded the United States’ credit rating, because our debt to income ratio was too risky, because Congress waited too long to increase the debt ceiling.

All this brings me to how veterans’ disability checks could, however unlikely, be affected. Should the debt ceiling not get raised, then the Treasury goes into Extraordinary Measures mode, and has to then determine which obligations it chooses to pay, and which it can’t afford to pay.

What will likely happen is that the Treasury will authorize payments on the interest, but not the principal, and will reduce investments in things like bonds and the federal employee’s Thrift Savings Plan. While it is unlikely that mandatory spending items like Social Security and veterans’ disability payments could be affected, it is possible.

So, there you have it. And again, there are plenty of nuances and scenarios that could change the outlook at any given moment, but those are the basics. I will try to keep you updated as developments unfold.